.svg){kind=small}
%402x.svg){kind=small}
With the enacting of the Base Erosion and Profit Shifting Implementing Act (BEPS-I-Umsetzungsgesetz) the German legislature expanded the obligation to cooperate for all participants in the tax process. Therefore the German tax authority published updated Regulations Regarding the Documentation of Profit Allocations (short: GAufzV).
The GAufzV describes the requirements for the documentation between related enterprises.
In the future the documentation has to be split into a local file for country and company based information as well as a master file for facts about the whole group of related enterprises.
The necessary content of the local file was completely redone by the government. In general it has to contain all facts about the pricing. This includes not only the civil but also the economic relations between the companies. A description of the areas of activity, the management and organization structure has to be done. Changes throughout the financial year should also be traceable.
The obligation to create an analysis about the distribution of functions and risks is becoming more important. An explanation not only in numbers but also verbal explanation has to be included. If the pricing is based on a method like profit splitting a description of the measurable facts shall be done. The tax authority must be able to retrace the functions, risks and production steps of each participating company. As one of the objectives of the BEPS project is to develop transfer pricing guidelines that align pricing outcomes with value creation, the requirement increases to review how profits and functions are mapped to the organizations overall value chain.
The documentary must be based on facts. If possible assumptions should be avoided. The document regarding the date of the price calculation has to be recorded. This will provide additional information, whether the documentation was done before or after a specific deal.
Databases used for the determination of transfer prices have to be completely transparent. Every calculation has to be documented in detail. The auditor of the tax authority must be able to recreate the research with the same search results, so even different database versions should be held available.
The master file is newly implemented. It has only to be done by corporate groups with locations in different countries and revenue of 100 Mio EUR or more. The German tax authority made an annex with all the information that need to be documented. For subsidiaries it is possible to assume the records of the mother company. Then only the missing details have to be added.
Small companies with deliveries of goods of 6 Mio EUR or less and services with 600 K EUR or less to related companies, are not obligated to create a written documentation about their profit allocations. If demanded they have to give the German tax office the same necessary information like mentioned above.
Documentation not available, insufficient or not created in a timely manner will result in a fine by the tax authority with an estimated and higher taxable profit and penalty surcharges.
